Solar credits

Solar tax credits were, for a decade, one of the most reliable incentives in real estate: a flat 30% federal credit that made panels pencil out on homes and rentals alike. That era ended abruptly in 2025. The residential solar credit is gone, terminated years ahead of schedule, and the commercial solar credit that remains for income-producing property is on an accelerated countdown with new sourcing rules. This page is deliberately blunt about what changed, because solar advice written before mid-2025 will steer you wrong.

The residential credit is gone

The headline is stark. The 30% residential solar tax credit, Section 25D, which let homeowners take 30% of the cost of a home solar system straight off their federal tax, was terminated for expenditures made after December 31, 2025. Under the prior law it had been scheduled to continue into the early 2030s before phasing down; the 2025 law ended it nearly a decade early. For a homeowner-purchased system installed in 2026 or later, there is no federal residential solar credit.

This matters to real estate investors mainly for property you occupy or for a personal residence, since 25D was an owner-occupant credit. If you were counting on the 30% credit for solar on your own home, that plan no longer works for post-2025 installations. The residential incentive that drove much of the home-solar market is simply no longer there federally.

The 30% residential solar tax credit ended for expenditures after December 31, 2025, so a homeowner-purchased system installed in 2026 or later gets no federal residential credit.

What remains for rental and commercial property

For income-producing real estate, a rental portfolio, a commercial building, the relevant incentive is the commercial clean electricity investment credit under Section 48E, and it survives, which is the important distinction. Solar on a property you rent out or operate as a business can still qualify for a commercial investment credit, even though the residential version is dead.

But it is on a countdown. To qualify, a solar facility must generally begin construction by July 4, 2026 or be placed in service by December 31, 2027. That makes timing the whole game for an investor considering solar on commercial or rental property: you need to meet and document the begin-construction test before the deadline to lock in eligibility under the transition rule. Layered on top are new foreign-entity-of-concern restrictions that can disqualify a project relying on certain foreign-manufactured components, so the equipment supply chain now carries tax consequences it did not before. The credit is real and still valuable for rental property, but only inside this closing window and subject to the sourcing rules.

Solar on income-producing rental or commercial property can still earn the commercial Section 48E credit, but generally only if construction begins by July 4, 2026 or it is placed in service by December 31, 2027.

The leasing wrinkle, and coordinating with depreciation

Two finer points. First, leasing survived where ownership did not, in a specific way: the 2025 law preserved the commercial credit for third-party-owned residential solar, the lease and power-purchase-agreement model, so a homeowner can still benefit indirectly through a leased system whose commercial owner claims 48E, even though the homeowner cannot claim a purchase credit. Leased residential solar water heating and small wind, by contrast, were eliminated. This preserves a path to home solar economics through leasing that direct purchase no longer offers.

Second, for an investor who does qualify for the commercial credit, coordinate it with depreciation. Solar on a commercial property is depreciable, and claiming the investment credit reduces the depreciable basis by half the credit amount, so the credit and the depreciation (including any bonus depreciation and a cost-segregation study on the broader property) interact and should be modeled together rather than claimed in isolation. The after-tax value of a rental solar project is the credit plus the depreciation, net of the basis reduction, not the credit alone.

Leased residential solar survives through the commercial credit even though purchased residential solar does not, and for qualifying commercial systems the investment credit reduces depreciable basis, so it must be coordinated with depreciation.

The bottom line

• The 30% residential solar credit was terminated for expenditures after December 31, 2025, nearly a decade early.
• A homeowner-purchased system in 2026 or later gets no federal residential solar credit.
• Solar on income-producing rental or commercial property can still earn the commercial Section 48E credit.
• That credit generally requires beginning construction by July 4, 2026 or placement in service by December 31, 2027.
• Leased residential solar survives through the commercial credit, and the credit reduces depreciable basis.

For the broader energy-credit changes, read energy tax credits. For the depreciation it coordinates with, see what is cost segregation. For the full picture, start at the advanced real estate tax strategies hub.

Last verified August 2026.